Is funky business all funked-up?

Oops! What happened? Why didn’t we see it come? If we over-consume (some of us more than others), and then invent new financial instruments (the last resort in banking where all players have access to the very same technonlogies, formulas, MBAs, etc.), whereof which some (many) had some pretty surprising side-effects (most innovations do... electricity did allow us to make toastelectrocute people!) that allow us to consume even more, eventually reality will catch up with us. It did!!!

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At the end of the day, the global market economy is just a gigantic and pretty messy laboratory. In today’s deregulated and globalized world, we are experimenting with more things and at more places than we have ever done before. Experiments are risky. Some of them can and will fail. That, however, does not mean that we should stop trying. As the super-investor Warren Buffet recently put it, “Capitalism without failure is like Christianity without hell”.

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Global market capitalism may not be perfect, but, to paraphrase Churchill, it is the least imperfect system that we have come up with so far. Global market capitalism is not right or wrong, good or bad, it just is. The market is a machine that sorts the efficient from the inefficient. It is not a substitute for responsibility.

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Markets understand efficiency, but it’s also just about the only thing a market does understand. Maybe, some would argue, there’s something wrong with the machine? Perhaps Lehman Brothers and GM were/are really fantastic companies, but there was a small screw missing in the machine so that, by a mishap really, they came out labeled inefficient? I don’t think so. In fact, anyone who’s ever driven a GM car and compared it to a BMW or Toyota (not recently though - yes I added this later) wouldn’t think so.

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But, perhaps there’s a more fundamental problem with the machine. What if we’re using the wrong sorting mechanism? We should be open to the fact that a system so one-sidedly focused on efficiency may not produce outcomes that in the long run live up to the criterion of sustainability. Or, even worse, what if the current regime produces wealth at the expense of health – financial, environmental, physical, etc? These are the issues that we need to discuss.

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All machines can be tampered with. What we’ve been experiencing is not so much a crisis of capitalism as it’s been/is a crisis of ethics. Do note, however, that communism was not exactly a bastion of moral sentiments. North Korean leader, Kim Jong Il, recently invested in six private luxury trains and 19 personal railway stations. The deviant dictator in plateau-shoes seems quite a consumption athlete even compared to someone like Bernie “the Ponzi” Madoff.

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I’m of the opinion that any overarching ideology that operates under false assumptions about the true nature of man is bound to produce an excessive amount of inefficiencies and ineffectiveness, and... eventually fail. Communism collapsed because it completely underestimated the constructive force of human creativity and entrepreneurship that is tied to individual freedom - individualism at its best (and then there was Ronnie).

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But, and perhaps this is a major but, what if, in the bright light of hindsight, we’ll realize that early 21st century capitalism 1.0 failed (temporarily) since it underestimated the destructive forces of egocentrism, personal sub-optimization and greed that are associated with unfettered individualism and the lack of a common purpose. Maybe the elites of the world need to realize that with increased freedom follow also more calls for responsibility – not only for yourself, but also for the greater good. By the way, this is not my idea, the father of liberalism, Adam Smith wrote about it some 225 years ago. History may not repeat itself, but it certainly rhymes...

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The current problems, I think, have a lot to do with the fact that “we” elevated the principle of free market capitalism to almost religious stature. When you do that, there is a clear risk that what used to be deadly sins, such as greed and froth - Lehman Brothers and La Bling - suddenly become heavenly virtues. The current wake-up call should be telling us that over time any society that bases notions of progress only on technological innovation and institutional deregulation, and completely disregards advances and unity also in our values, will risk producing limited amounts of long-lasting value.

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Yet (and here's the really good news - from someone who grew up not that far away from the USSR), keep in mind that whereas a world of freedom can be good and bad, a world without freedom can only be bad.

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Freedom is a learning process - remember growing up - let's not repeat the same mistake twice. So, to succeed, the irony of things is that we must all find new mistakes to make!!!